Japan’s Carry Trade

http://www.wealthdaily.com/articles/japans-carry-trade/8165

CH:  Dislocations continue!

http://goo.gl/1cRjtn

Alfred Gohdes, chief actuary in the Frankfurt office of Willis Towers Watson, the world’s largest adviser to institutional investors, described Bafin’s intervention as “unusual”.

He said: “In Germany only one pension fund has cut benefits previously. This happened more than 10 years ago. Now there is a strong possibility of benefits being cut in Germany if low rates continue. It is a slow poisoning [of the pension system].”

http://goo.gl/4OanXD

CH: Never have the warning signals for a financial disaster of biblical proportions  been so obvious and extant!!!

Read Here:  Negative Interest Rates in Europe: A Glance at Their Causes and Implications

•Excerpt on Fair Value from World Bank Report

Anomalies in the valuation of returns and payment streams.

As interest rates approach zero, the calculation of present values of streams of cash flows becomes increasingly sensitive to the discount rate.7 Indeed, the present value of any stream can be made arbitrarily large by choosing a low enough discount rate. This becomes a contentious issue in the negotiation of fair value in legal settlements. As discount rates of zero or less have no economic meaning, a prolonged period of negative interest rates would create large ambiguities for the valuation of assets and liabilities

By Richard W. Rahn

http://goo.gl/1btujQ

Is it just me? I must be missing something

Time to start paying attention to what negative interest rates really mean:  (Just ask Larry Fink)

The financial press is full of articles on the dangers of this policy. These unconventional moves have provoked a lot of criticism, especially from the banking community who fear a strangulation of normal banking activities. A lot has been written about the dangers that NIR pose to the stability of banks and to the possible harm to savers and investors alike. This article is an attempt to put the whole question of NIR into a more balanced perspective. To begin with, it is important to have some background to why and how NIRs have come to characterize so much of government debt

http://goo.gl/TYh53D

The world’s largest investor says negative rates are breeding a disaster for the economy

http://goo.gl/lh1Dlm

Market Watch:

The concept of a negative interest rate is one that would be considered unthinkable just aew years ago. Yet today, around a third of global government debt offers a negative yield. The consequences are widespread. Financial textbooks are being rewritten, companies are asking vendors to postpone payment, and banks are even rewriting software code.

1. What is a negative interest rate?

2. Why would a central bank pursue a negative interest rate strategy?

3. Why would any rational investor accept a negative yield?

4. What are the implications for retirees?

5. Should retirees be worried?

http://goo.gl/g3sh4H

Negative interest rates, which central banks in several countries have implemented as a way to spur economic growth, is a radical move. In this three-part series, ‘Negative Thinking,’ commentator Satyajit Das examines this policy and the risk it carries.

Several of the world’s central banks have crossed the Rubicon, commencing a high-risk experiment with negative interest rates. The intent is clear: reduce debt by confiscation and transfer wealth from savers to borrowers. This is ultimately an admission of defeat, as traditional means of bringing excessive debt under control have failed.

http://goo.gl/IKRncK